by Tom Taulli | January 17, 2014 11:18 am
BlackRock (BLK) posted another solid quarter yet again. Profits came to $841 million, or $4.86 per share, and revenues climbed by 9% to $2.78 billion. The Street was looking for BlackRock earnings of $4.33 per share and revenues of $2.69 billion.
True, BLK stock is up only 1% in today’s trading, but it has already posted nice gains for the past year, at about 43%. The overall market is also on the downside today, which is probably hampering gains, despite solid BlackRock earnings.
Despite all this, the fact remains that BLK stock has been a consistent winner, thanks in large part to some big bets as well as key investments from the manager.
So let’s take a further look at why BLK has turned into one of the world’s best money managers:
#1 — Global Powerhouse
BLK manages more than $4.3 trillion in assets. And last year, the firm added about $117.1 billion in long-term net inflows.
It certainly helps that BLK provides a diverse platform of investment options. In fact, the company manages more than 7,000 portfolios and has more than 1,600 investment professionals. Consider that their products include mutual funds, exchange-traded funds (ETFs), hedge funds, separate accounts, insurance funds, collective trusts and closed-end funds. That makes BLK stock something of a one-stop shop for investors.
#2 – Innovation
The investment management business is intensely competitive, with mega players like Pimco, Franklin Resources (BEN), Fidelity, Wells Fargo (WFC), Vanguard and T. Rowe Price (TROW). So to keep up the growth — and the momentum in BLK stock — Blackrock has continued to aggressively push innovation.
Part of that innovation has come in the form of interesting products from BlackRock, such as investment vehicles that tap categories like frontier markets. But BLK has also worked hard to creating new types of investment strategies. One of the most popular has been target funds (which are focused on achieving goals, such as for retirement).
BlackRock stock has also gotten a nice boost from investments in sophisticated technologies. Just take a look at Aladdin, which is a state-of-the-art risk management system. It operates on a 24/7 basis and BLK has dedicated about 700 programmers to it. That kind of investment keeps BLK stock ahead of the game.
#3 – ETFs
Back in 2009, BLK made a gutsy move, shelling out $13.5 billion for Barclays Global Investors. The deal seemed pricey at the time, but it turned out to be a big winner.
BLK got ownership of the valuable iShares system, which is a big franchise in the ETF market. And without iShares, it’s a pretty good bet that BLK stock would have been a dismal performer over the past few years.
The good news is that the prospects for ETFs still look bright. There appears to be a secular shift to this type of vehicle because of the rock-bottom costs and the flexibility (such as quickly getting exposure to a myriad of asset classes, regions and strategies). ETFs also have lots of room for growth in global markets, which should keep bringing value to BLK stock.
#4 – International Potential
While BLK has clients in more than 100 countries, the fact remains that the firm still gets a big part of its fees from the US. But going forward, there will be more emphasis on foreign markets.
The opportunities are huge, especially for products like Aladddin and ETFs. No doubt, there are some countries that also have massive potential. This is certainly the case with China, which continues to post strong economic growth.
#5 – Financials
With its scale, BLK has the advantage of spreading the costs of functions like compliance, marketing and R&D. The result is that the company has juicy operating margins at more than 40%. Blackrock earnings include more than $3 billion in operating cash flows on an annual basis, which has definitely been a key driver for BLK stock.
The company also has been shareholder friendly, with a decent dividend yield of 2.1%. Yet the capital appreciation for BLK stock has been the real story. Since going public in 1999, the compound annual total return was a sizzling 25%. That performance is especially impressive in light of the tumultuous events during this period, like the dot-com bust, 9/11 and the financial crisis.
If the latest BlackRock earnings are any indication, these strengths will continue to power BLK stock throughout 2014.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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